SF Holding set to invest in Kerry Logistics?

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China-based express firm SF Holding is considering investing $5bn in Kerry Logistics, according to Bloomberg.

Unnamed sources told the newswire that the Shenzhen-listed firm will invest in a stake of around 20%.

The news comes after shares in SF Holdings, which owns SF Express and SF Airlines, were suspended on Friday for as many as five trading days.

The company said in a stock exchange announcement that it was aiming to buy a stake in an unnamed company as it sought to improve its logistics offering.

Kerry Logistics Network also halted trading in its shares.

Bloomberg Intelligence Analyst James Teo said that Kerry Logistics network of facilities in China would help meet the needs of its growing domestic business, while the company’s presence in Southeast Asia would help SF meet a shift in manufacturing away from China.

SF has been growing rapidly over recent years as it benefits from the online shopping boom.

Bloomberg said that the value of its shares have tripled over the last 12 months and its market capitalisation of around $75bn is higher than that of FedEx.

This would not be its first investment in expanding its logistics capabilities in recent years.

In 2019, Deutsche Post DHL (DPDHL) concluded a deal to transfer its supply chain operations in China to SF Holding in a ten-year strategic partnership to grow the business in China.

As part of this deal, which was first announced at the end of October 2018, DP DHL will receive an upfront payment of RMB5.5bn (approximately €700m) and a revenue-based partnership fee over the next decade.

From an airfreight perspective, SF Holding’s fleet has also grown rapidly. SF Airlines is currently the largest cargo airline in China, with a fleet of 61 aircraft, serving more than 70 cities.

In 2019, Kerry Logistics saw revenues increase by 8% year on year to HK$41.3bn, while core operating profit was up 17% to HK$2.8bn and core net profit improved 4% to HK$1.4bn.

At the half year point in 2020, core net profit rose 26% to HK$845m in the first half of 2020 as profits at its international freight forwarding (IFF) segment surged by 40% to HK$403m.

The Hong Kong-listed group’s revenue for the first six months to end of June increased by 10% year on year to HK$21,885m as core operating profit increased by 12% to HK$1,489m.

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